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`UNITED STATES COURT OF INTERNATIONAL TRADE
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`A LA CARTE SPECIALTY FOOD LLC.
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`Plaintiff,
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`v.
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`Court No. 20-00984
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`UNITED STATES OF AMERICA;
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`OFFICE OF THE UNITED STATES TRADE
`REPRESENTATIVE; ROBERT E. LIGHTHIZER, U.S. :
`TRADE REPRESENTATIVE; U.S. CUSTOMS &
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`BORDER PROTECTION; MARK A. MORGAN, U.S. :
`CUSTOMS & BORDER PROTECTION ACTING
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`COMMISSIONER,
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`Defendants.
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`COMPLAINT
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`Plaintiff A La Carte Specialty Food LLC (“A La Carte”), by and through its attorneys,
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`allege and state as follows:
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`1.
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`This action concerns Defendants’ imposition of unlawful tariffs. The United States
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`has initiated a trade war with the People’s Republic of China that impacts over $500 billion worth
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`of Chinese imports, with U.S. companies bearing the immediate cost of the tariffs imposed on
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`these targeted Chinese goods. This Complaint focuses on Defendants’ unlawful escalation of that
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`trade war through the imposition of a third round of tariffs on products covered by so-called “List
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`3.” Notice of Modification of Section 301 Action: China’s Acts, Policies, and Practices Related to
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`Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 47,974 (Sept. 21, 2018).
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`2.
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`The Office of the United States Trade Representative (“USTR”) conducted an
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`investigation into China’s unfair intellectual property (“IP”) policies and practices pursuant to
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`Section 301 of the Trade Act (19 U.S.C. § 2411). Section 304 of the Trade Act (19 U.S.C. § 2414)
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`required USTR to determine what action to take, if any, within 12 months after initiation of that
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`investigation. USTR took action to impose tariffs on imported Chinese goods identified in List 1
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`and List 2 within 12 months after the initiation of its Section 301 investigation and was based on
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`the findings made in that investigation.
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`3.
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`USTR, however, failed to issue List 3 (or subsequent List 4) within that 12-month
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`window. Moreover, the basis for imposing tariffs on the List 3 and List 4 goods was not articulated
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`in any way in the findings made pursuant to USTR’s investigation. USTR has no legal basis to rely
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`on its “modification” authority under Section 307 of the Trade Act (19 U.S.C. § 2417) to try to
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`justify the imposition of tariffs on the List 3 and List 4 goods. The plain language of Section 307
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`of the Trade Act does not permit USTR to arbitrarily expand the imposition of tariffs to other
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`Chinese imports that are wholly unrelated to the allegations of unfair intellectual property policies
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`and practices that USTR originally investigated and made findings under Section 301 of the Trade
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`Act. The Trade Act permits USTR only to delay, taper, or terminate the actions it has already taken,
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`but does not authorize USTR to arbitrarily expand its actions without making further investigation
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`and findings to support any additional actions taken.
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`4.
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`The Defendants actions to impose tariffs the List 3 goods also violated the
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`Administrative Procedure Act (“APA”). USTR (1) failed to provide sufficient opportunity for
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`comment, e.g., unrealistically requiring interested parties to submit both affirmative and rebuttal
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`comments on the same day; (2) failed to address relevant factors when making its decision, e.g.,
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`providing no analysis of how much “increased burden” would be imposed on U.S. commerce from
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`China’s retaliatory tariffs, as distinguished from China’s unfair IP policies and practices that it
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`originally investigated and made findings on; and (3) failed to articulate how the record facts
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`supported the actions taken, e.g., despite receiving over 6,000 comments, many of which were
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`very opposed to the imposition of tariffs, USTR completely disregarded those comments and did
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`not indicate to what extent, if any, those comments were considered by USTR in determining
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`which products should be included on the List 3 tariff list. USTR’s decision-making was arbitrary
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`and pre-ordained, and was in violation of the legal standards set forth under the APA.
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`5.
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`We request that the Court set aside Defendants’ actions to impose tariffs on the List 3
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`(and List 4a) goods as ultra vires and otherwise contrary to law, and to order Defendants to refund
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`(with interest) any tariffs paid by Plaintiffs pursuant to List 3 (and List 4a).
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`JURISDICTION
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`6.
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`The Court possesses subject matter jurisdiction over this action pursuant to 28
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`U.S.C. § 1581(i)(1)(B), which confers “exclusive jurisdiction” to the Court over “any civil action
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`commenced against the United States, its agencies, or its officers, that arises out of any law of the
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`United States providing for . . . tariffs, duties, fees, or other taxes on the importation of merchandise
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`for reasons other than the raising of revenue.” 28 U.S.C. § 1581(i)(1)(B).
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`PARTIES
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`7.
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`Plaintiff A La Carte is a U.S. importer and distributor of seafood products, including
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`frozen breaded oysters from China. A La Carte has made numerous entries of frozen breaded oysters
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`that are classified under HTSUS subheading 1605.51.5000 and are subject to the additional ad
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`valorem duties under List 3.
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`8.
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`Defendant United States of America received the disputed tariffs and is the statutory
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`defendant under 5 U.S.C. § 702 and 28 U.S.C. § 1581(i)(1)(B).
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`9.
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`The Office of the USTR is an executive agency of the United States charged with
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`investigating a foreign country’s trade practices under Section 301 of the Trade Act and
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`implementing “appropriate” responses, subject to the direction of the President. USTR conducted
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`the Section 301 investigation at issue and made numerous decisions regarding List 3.
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`10.
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`Ambassador Robert E. Lighthizer currently holds the position of USTR and serves
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`as the director of the Office of the USTR. In this capacity, he made numerous decisions regarding
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`List 3.
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`11.
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`Defendant U.S. Customs & Border Protection (“CBP”) is the agency that collects
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`duties on imports. CBP collected payments made by Plaintiffs to account for the tariffs imposed
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`by USTR under List 3.
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`12.
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`Defendant Mark A. Morgan is the Acting Commissioner of CBP. In this capacity,
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`he oversees CBP’s collection of duties paid by Plaintiff under List 3.
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`STANDING
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`13.
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`A La Carte has standing to sue because it has been “adversely affected or aggrieved
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`by agency action within the meaning of” the APA. 5 U.S.C. § 702; see 28 U.S.C. § 2631(i) (“Any
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`civil action of which the Court of International Trade has jurisdiction . . . may be commenced
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`in the court by any person adversely affected or aggrieved by agency action within the meaning of
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`Section 702 of title 5.”). Tariffs imposed by Defendants pursuant to List 3 (and List 4A) adversely
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`affected and aggrieved A La Carte because it was required to pay these unlawful duties.
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`TIMELINESS OF THE ACTION
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`14. A plaintiff must commence an action under 28 U.S.C. § 1581(i)(1)(B) “within two
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`years after the cause of action first accrues.” 28 U.S.C. § 2636(i).
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`15. This action contests the actions taken by Defendants that resulted in the imposition
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`of tariffs on List 3. Notice of Modification of Section 301 Action: China’s Acts, Policies, and
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`Practices Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg.
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`47,974 (Sept. 21, 2018). Plaintiff’s claims accrued at the earliest on September 21, 2018, when
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`USTR published notice of List 3 in the Federal Register. Id. Plaintiff thus has timely filed this
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`action.
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`RELEVANT LAW
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`16. Section 301 of the Trade Act authorizes USTR to investigate a foreign country’s trade
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`practices. 19 U.S.C. § 2411(b). If the investigation reveals an “unreasonable or discriminatory”
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`practice, USTR may take “appropriate” action, such as imposing tariffs on imports from the country
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`that administered the unfair practice. Id. § 2411(b), (c)(1)(B).
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`17. Section 304 of the Trade Act requires USTR to determine what action to take, if any,
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`within 12 months after the initiation of the underlying investigation. Id. § 2414(a)(1)(B), (2)(B).
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`18.
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`Section 307 of the Trade Act (in pertinent part) allows USTR to “modify or
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`terminate” an action taken pursuant to Section 301 of the Trade Act either when the “burden or
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`restriction on United States commerce” imposed by the investigated foreign country’s practice has
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`“increased or decreased” or when the action “is no longer appropriate.” Id. § 2417(a)(1)(B), (C).
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`PROCEDURAL HISTORY
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`I.
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`USTR’s Investigation
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`19.
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`The current U.S.-China trade was originally based on a narrow premise. On August 14,
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`2017, President Trump directed Ambassador Lighthizer to consider initiating a targeted
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`investigation pursuant to Section 301(b) of the Trade Act concerning China’s laws, policies,
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`practices, and actions related to intellectual property, innovation, and technology. Addressing
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`China’s Laws, Policies, Practices, and Actions Related to Intellectual Property, Innovation, and
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`Technology, 82 Fed. Reg. 39,007 (Aug. 17, 2017). According to the President, certain Chinese
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`“laws, policies, practices, and actions” on intellectual property, innovation, and technology “may
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`inhibit United States exports, deprive United States citizens of fair remuneration for their
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`innovations, divert American jobs to workers in China, contribute to our trade deficit with China,
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`and otherwise undermine American manufacturing, services, and innovation.” Id.
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`20.
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`On August 18, 2017, USTR formally initiated an investigation into “whether acts,
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`policies, and practices of the Government of China related to technology transfer, intellectual
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`property, and innovation are actionable under [Section 301(b) of] the Trade Act.” Initiation of
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`Section 301 Investigation; Hearing; and Request for Public Comments: China’s Acts, Policies, and
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`Practices Related to Technology Transfer, Intellectual Property, and Innovation, 82 Fed. Reg.
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`40,213 (Aug. 24, 2017).
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`21.
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`Seven months later, on March 22, 2018, USTR released a report announcing the
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`results of its investigation. OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE,
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`Findings of the Investigation Into China’s Acts, Policies, And Practices Related to Technology
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`Transfer, Intellectual Property, and Innovation Under Section 301 of The Trade Act of 1974 (Mar.
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`22, 2018), available at https://ustr.gov/sites/default/files/Section%20301%20FINAL.PDF. USTR
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`found that certain “acts, policies, and practices of the Chinese government related to technology
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`transfer, intellectual property, and innovation are unreasonable or discriminatory and burden or
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`restrict U.S. commerce.” Id. at 17. USTR based its findings on (1) China’s use of foreign ownership
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`restrictions, foreign investment restrictions, and administrative licensing and approval processes
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`to pressure technology transfers from U.S. to Chinese companies, id. at 45; (2) China’s use of
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`licensing processes to transfer technologies from U.S. to Chinese companies on terms that favor
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`Chinese recipients, id. at 48; (3) China’s facilitation of systematic investment in, and acquisition
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`of, U.S. companies and assets by Chinese entities to obtain technologies and intellectual property
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`for purposes of large-scale technology transfer, id. at 147; and (4) China’s cyber intrusions into
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`U.S. computer networks to gain access to valuable business information, id. at 171. USTR’s report,
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`did not include any calculation or estimate of the amount of burden or restriction imposed on U.S.
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`commerce by the investigated Chinese IP practices.
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`22.
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`On the same date, USTR published a “Fact Sheet” stating that “[a]n interagency
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`team of subject matter experts and economists estimates that China’s policies result in harm to the
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`U.S. economy of at least $50 billion per year.” OFFICE OF THE UNITED STATES TRADE
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`REPRESENTATIVE, Section 301 Fact Sheet (Mar. 22, 2018), available at https://ustr.gov/about-
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`us/policy-offices/press-office/fact-sheets/2018/march/Section-301-fact-sheet. USTR
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`also
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`indicated that, consistent with a directive from President Trump, it would “propose additional
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`tariffs” of 25% ad valorem “on certain products of China, with an annual trade value commensurate
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`with the harm caused to the U.S. economy resulting from China’s unfair policies.” Id.; see Actions
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`by the United States Related to the Section 301 Investigation of China’s Laws, Policies, Practices,
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`or Actions Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg.
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`13,099 (Mar. 27, 2018) (President Trump’s directive).
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`II.
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`Lists 1 & 2
`23.
`Between April and August 2018 (i.e., within the 12-month statutory deadline from
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`the initiation of the investigation in August 2017, see 19 U.S.C. § 2414(a)(2)(B)), Defendants
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`undertook a series of actions to remedy the estimated $50 billion of harm to the U.S. economy
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`caused by the investigated unfair practices, and ultimately imposed duties on various products
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`imported from China covered by the so-called Lists 1 and 2.
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`24.
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`On April 6, 2018, USTR published notice of its intent to impose “an additional duty
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`of 25 percent on a list of products of Chinese origin.” Notice of Determination and Request for
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`Public Comment Concerning Proposed Determination of Action Pursuant to Section 301: China’s
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`Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and
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`Innovation, 83 Fed. Reg. 14,906, 14,907 (Apr. 6, 2018). The products on the proposed list covered
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`1,333 tariff subheadings with a total value of “approximately $50 billion in terms of estimated
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`annual trade value for calendar year 2018.” Id. at 14,907. USTR explained that it chose $50 billion
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`because that amount was “commensurate with an economic analysis of the harm caused by China’s
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`unreasonable technology transfer policies to the U.S. economy, as covered by USTR’s Section 301
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`investigation.” OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE, Under Section 301 Action,
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`USTR Releases Proposed Tariff List on Chinese Products (Apr. 3, 2018), available at
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`https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/april/under-section-301-
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`action-ustr.
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`25.
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`On June 20, 2018, USTR published notice of its final list of products subject to an
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`additional duty of 25% ad valorem, a list commonly known as “List 1.” Notice of Action and
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`Request for Public Comment Concerning Proposed Determination of Action Pursuant to Section
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`301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property,
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`and Innovation, 83 Fed. Reg. 28,710 (June 20, 2018). USTR explained that it had “narrow[ed] the
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`proposed list in the April 6, 2018 notice to 818 tariff subheadings, with an approximate annual
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`trade value of $34 billion.” Id. at 28,711.
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`26.
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`At the same time that it finalized List 1, USTR announced that it intended to impose
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`a 25% ad valorem duty on a second proposed list of Chinese products in order to “maintain the
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`effectiveness of [the] $50 billion trade action” grounded in its Section 301 investigation. Id. at
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`28,712. USTR announced a proposed “List 2” covering 284 tariff subheadings with “an
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`approximate annual trade value of $16 billion.” Id. at 28,711-12.
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`27.
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`On August 16, 2018, USTR published notice of the final list of products subject to
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`an additional duty of 25% ad valorem in List 2, comprising “279 tariff subheadings” whose “annual
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`trade value . . . remains approximately $16 billion.” Notice of Action Pursuant to Section 301:
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`China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and
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`Innovation, 83 Fed. Reg. 40,823, 40,823-24 (Aug. 16, 2018).
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`III. List 3 and List 4
`28.
`After USTR announced its investigation findings in March 2018, the U.S.-China
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`trade war escalated with the governments of U.S. and China each taking respective actions. Shortly
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`after President Trump directed USTR in April 2018 to consider imposing duties on $50 billion in
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`Chinese products, China promptly threatened to impose retaliatory duties on the same value of
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`imports from the United States.
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`29.
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`In response to China’s threat of retaliatory tariffs, President Trump “instructed the
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`USTR to consider whether $100 billion of additional tariffs would be appropriate under Section
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`301” due to “China’s unfair retaliation.” THE WHITE HOUSE, Statement from Donald J. Trump on
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`Additional Proposed
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`Section
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`301 Remedies
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`(Apr.
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`5,
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`2018),
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`available
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`at
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`https://www.whitehouse.gov/briefings-statements/statement-president-donald-j-trump-
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`additional-proposed-section-301-remedies/.
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`A.
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`30.
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`List 3
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`USTR finalized List 1 in mid-June 2018. At that same time, President Trump stated
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`that he would consider imposing additional tariffs on Chinese goods if China retaliated against the
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`United States. E.g., Vicki Needham & Max Greenwood, Trump Announces Tariffs on $50 Billion
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`in Chinese Goods, THE HILL (June 15, 2018), available at http://thehill.com/homenews/
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`administration/392421-trump-announces-tariffs-on-50-billion-in-chinese-goods (“The president
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`said the United States will pursue additional tariffs if China retaliates ‘such as imposing new tariffs
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`on United States goods, services or agricultural products; raising non-tariff barriers; or taking
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`punitive actions against American exporters or American companies operating in China.’”).
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`31.
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`After China threatened to impose tariffs on $50 billion worth of U.S. exports to
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`China, President Trump officially directed USTR to consider whether the United States should
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`impose additional duties on products from China with an estimated trade value of $200 billion—
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`despite USTR having not yet implemented List 1 and List 2. President Trump specifically noted
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`that China’s threatened retaliatory “tariffs on $50 billion worth of United States exports”
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`motivated his decision. THE WHITE HOUSE, Statement from the President Regarding Trade with
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`China (June 18, 2018), available at https://www.whitehouse.gov/briefings-statements/statement-
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`president-regarding-trade-china-2/ (“This latest action by China clearly indicates its
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`determination to keep the United States at a permanent and unfair disadvantage, which is
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`reflected in our massive $376 billion trade imbalance in goods. This is unacceptable.”).
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`32.
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`USTR acknowledged the purpose of the President’s directive and specifically
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`stated that it would design the newly proposed duties to address China’s threatened retaliatory
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`measures, rather than to address any of the harms originally identified in its Section 301
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`investigation. OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE, USTR Robert Lighthizer
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`Statement on the President’s Additional China Trade Action (June 18, 2018), available at
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`https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/june/ustr-robert-lighthizer-
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`statement-0 (although Lists 1 and 2 “were proportionate and responsive to forced technology transfer and
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`intellectual property theft by the Chinese” identified in the Section 301 investigation, the proposed duties
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`for a third list of products were necessary to respond to the retaliatory and “unjustified tariffs” that China
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`may impose to target “U.S. workers, farmers, ranchers, and businesses”).
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`33.
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`Notwithstanding these U.S. threats of additional tariffs beyond the originally
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`declared $50 billon identified in USTR’s investigation, China retaliated against the United States
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`by imposing 25% ad valorem tariffs on $50 billion in U.S. goods imported into China. China’s
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`tariffs against U.S. imports into China were implemented in two stages of $34 billion and $16
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`billion that mirrored the value of targeted goods and the same effective dates as the United States’s
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`tariff actions against Chinese imports to collect 25% tariffs under List 1 (July 6, 2018) and List 2
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`(August 23, 2018).
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`34.
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`About a week after China imposed its first round of retaliatory duties, USTR
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`published notice of its proposal to “modify the action in this investigation by maintaining the
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`original $34 billion action and the proposed $16 billion action, and by taking a further,
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`supplemental action” in the form of “an additional 10 percent ad valorem duty on [a list of]
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`products [from] China with an annual trade value of approximately $200 billion.” Request for
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`Comments Concerning Proposed Modification of Action Pursuant to Section 301: China’s Acts,
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`Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 83
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`Fed. Reg. 33,608, 33,608 (July 17, 2018).
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`35.
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`USTR in its notice invoked Section 307(a)(1)(C) of the Trade Act, pursuant to
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`which USTR “may modify or terminate any action, subject to the specific direction, if any, of the
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`President with respect to such action, . . . if . . . such action is being taken under [Section 301(b)] of
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`this title and is no longer appropriate.” Id. at 33,609 (citing 19 U.S.C. § 2417(a)(1)(c)). USTR
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`initially set a deadline of August 17, 2018 for initial comments; August 20-23, 2018 for a public
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`hearing; and August 30, 2018 for rebuttal comments. Id. at 33,608.
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`36.
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`USTR in it is notice also confirmed that it had relied on China’s decision to impose
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`“retaliatory duties” as the primary basis for its proposed action. Id. at 33,609 (asserting as
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`justification “China’s response to the $50 billion action announced in the investigation and its
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`refusal to change its acts, policies, and practices”). USTR explicitly tied the $200 billion in its
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`proposed action to the level of retaliatory duties imposed by China on U.S. imports, noting that
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`“action at this level is appropriate in light of the level of China’s announced retaliatory action ($50
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`billion) and the level of Chinese goods imported into the United States ($505 billion in 2017).”
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`Id.. Although it pointed to China’s retaliatory measures, USTR did not identify any increased
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`burdens or restrictions on U.S. commerce resulting from the unfair practices that USTR had
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`investigated. See id.
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`37.
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`USTR’s contemporaneous press statements further corroborated the contents of its
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`notice: that China’s retaliatory duties motivated USTR’s proposed action to impose even more
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`tariffs against Chinese imports. Ambassador Lighthizer stated that the proposed action came “[a]s
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`a result of China’s retaliation and failure to change its practice.” OFFICE OF THE UNITED STATES
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`TRADE REPRESENTATIVE, Statement by U.S. Trade Representative Robert Lighthizer on Section 301
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`Action (July 10, 2018), available at https://ustr.gov/about- us/policy-offices/press-office/press-
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`releases/2018/july/statement-us-trade-representative.
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`38.
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`President Trump on the same day stated on Twitter that the United States’ trade
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`imbalance with China supported the decision to impose additional tariffs against Chinese imports.
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`@realDonaldTrump,
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`(July
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`10,
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`2018,
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`9:17
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`PM
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`EDT),
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`https://twitter.com/realDonaldTrump/status/1005982266496094209. Over the following weeks,
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`President Trump also expressed his frustration over China’s purported manipulation of its currency
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`and national monetary policy, as well as his continued displeasure over China’s retaliatory tariffs
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`and the trade imbalance between the two nations. See, e.g., @realDonaldTrump, Twitter (July 20,
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`2018, 8:43 AM EDT), https://twitter.com/realDonaldTrump/status/1020287981020729344;
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`@realDonaldTrump, TWITTER (July 20, 2018, 8:51 AM EDT), https://twitter.com/realDonald
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`Trump/status/1020290163933630464; @realDonaldTrump, TWITTER (July 25, 2018, 7:20 AM
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`EDT), https://twitter.com/realDonaldTrump/status/1022079127799701504; @realDonaldTrump,
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`Twitter (July 25, 2018, 7:01 AM EDT), https://twitter.com/realDonaldTrump/status/1022074
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`252999225344.
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`39. Within days of these statements, Ambassador Lighthizer announced that, in light of
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`China’s retaliatory duties, USTR would propose to increase the additional duty from 10% to 25%
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`ad valorem. Rather than addressing the practices that USTR investigated pursuant to Section 301
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`of the Trade Act, he stated that China “[r]egrettably . . . has illegally retaliated against U.S. workers,
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`farmers, ranchers and businesses.” OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE,
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`Statement by U.S. Trade Representative Robert Lighthizer on Section 301 Action (Aug. 1, 2018),
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`available at https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/august/state
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`ment-us-trade-representative.
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`40.
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`Shortly thereafter, USTR, at the direction of President Trump, formally proposed
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`“raising the level of the additional duty in the proposed supplemental action from 10 percent to 25
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`percent.” Extension of Public Comment Period Concerning Proposed Modification of Action
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`Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer,
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`Intellectual Property, and Innovation, 83 Fed. Reg. 38,760, 38,760 (Aug. 7, 2018). USTR also set
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`new dates for a public hearing over six days ending on August 27, 2018. See id.; see also OFFICE
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`OF THE UNITED STATES TRADE REPRESENTATIVE, Public Hearings on Proposed Section
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`301 Tariff List (Aug. 17, 2018) (modifying hearing schedule), available at https://ustr.gov/about-
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`us/policy- offices/press-office/press-releases/2018/august/public-hearings-proposed-section-301.
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`41.
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`At the same time, USTR adjusted the deadlines for the submission of written
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`comments, setting September 6, 2018—less than a month later—as the new deadline for both
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`initial and rebuttal comments from the public. 83 Fed. Reg. at 38,761. That adjustment of the
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`deadlines for written comments was a clear and unexplained departure from its past practices. By
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`setting both initial and rebuttal comments deadlines on the same day, both USTR and the public
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`were effectively precluded from considering initial comments at the hearing, and left insufficient
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`time for interested parties to review and submit rebuttal comments in response to the initial
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`comments filed by other parties. USTR also limited each hearing participant to five minutes.
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`Docket No. USTR-2018-0026, https://beta.regulations.gov/document/USTR-2018-0026-0001.
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`Case 1:20-cv-00984-N/A Document 2 Filed 09/18/20 Page 14 of 24
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`42.
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`Despite those unrealistic deadlines and time restrictions, approximately 350
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`witnesses appeared at the six-day hearing, and the public submitted over 6,000 comments. Id.
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`USTR did not respond to any of the over 6,000 comments that it received or any of the testimony
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`provided by roughly 350 witnesses. Id.
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`43.
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`Despite this significant volume or submitted comments and witness testimony,
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`President Trump waited a mere eleven days to announce that he had directed USTR “to proceed
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`with placing additional tariffs on roughly $200 billion of imports from China.” THE WHITE
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`HOUSE, Statement from the President (Sep. 17, 2018) https://www.whitehouse.gov/briefings-
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`statements/statement-from-the-president-4/. Once again, the President made clear that China’s
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`response to the $50 billion tariff action (i.e., List 1 and List 2 duties) motived his decision, and he
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`immediately promised to proceed with “phase three” of the plan—an additional $267 billion tariff
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`action—“if China takes retaliatory action against our farmers or other industries.” Id.
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`44.
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`Following the President’s announcement, USTR published notice of the final list
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`of products subject to an additional duty, a list commonly known as “List 3.” 83 Fed. Reg. at
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`47,974. USTR imposed a 10% ad valorem tariff that was set to rise automatically to 25% on
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`January 1, 2019. Id. USTR determined that the List 3 duties would apply to all listed products that
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`enter the United States from China on or after September 24, 2018. Id.
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`45.
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`As legal support for its action, USTR for the first time cited Section 307(a)(1)(B)
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`of the Trade Act, which provides that USTR “may modify or terminate any action, subject to the
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`specific direction . . . of the President . . . taken under Section 301 if . . . the burden or restriction
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`on United States commerce of the denial of rights, or of the acts, policies, or practices, that are
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`the subject of such action has increased or decreased.” Id. (brackets omitted). USTR stated that
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`the relevant burden “continues to increase, including following the one-year investigation
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`period,” adding that “China’s unfair acts, policies, and practices include not just its specific
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`Case 1:20-cv-00984-N/A Document 2 Filed 09/18/20 Page 15 of 24
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`technology transfer and IP polices referenced in the notice of initiation in the investigation, but
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`also China’s subsequent defensive actions taken to maintain those policies.” Id. USTR also cited
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`Section 307(a)(1)(C) of the Trade Act, arguing that China’s response to the $50 billion tariff
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`action “has shown that the current action no longer is appropriate” because “China openly has
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`responded to the current action by choosing to cause further harm to the U.S. economy, by
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`increasing duties on U.S. exports to China.” Id. at 47,975. USTR did not provide any analysis or
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`supporting documentation of any increase in the burden on U.S. commerce caused by the
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`Chinese retaliatory tariffs.
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`46.
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`After this wave of tariffs being issued, China and the United States tried to negotiate
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`a resolution of this trade dispute. Based on the progress made with China in those negotiations,
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`the Trump Administration announced in December 2018, and again in February 2019, that it would
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`delay the scheduled increase in the List 3 duty rate from 10 to 25%. Notice of Modification of
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`Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer,
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`Intellectual Property, and Innovation, 83 Fed. Reg. 65,198 (Dec. 19, 2018); Notice of Modification
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`of Section 301 Action: China’s Acts, Policies, and Practices Related to Technology Transfer,
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`Intellectual Property, and Innovation, 84 Fed. Reg. 7,966 (Mar. 5, 2019).
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`47.
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`The trade negotiations, however, were unsuccessful. In May 2019, USTR
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`announced its intent to raise the tariff rate on List 3 goods to 25%, effective either May 10, 2019 or
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`June 1, 2019, depending on the day of export. See Notice of Modification of Section 301 Action:
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`China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and
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`Innovation, 84 Fed. Reg. 20,459 (May 9, 2019) (“List 3 Rate Increase Notice”); see also
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`Implementing Modification to Section 301 Action: China’s Acts, Policies, and Practices Related
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`to Technology Transfer, Intellectual Property, and Innovation, 84 Fed. Reg. 21,892 (May 15, 2019).
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`The notice cited China’s decision to “retreat from specific commitments agreed to in earlier
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`15
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`Case 1:20-cv-00984-N/A Document 2 Filed 09/18/20 Page 16 of 24
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`rounds” of negotiations as the basis for the increase in the duty rate. List 3 Rate Increase Notice, 84
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`Fed. Reg. at 20,459. Unlike with past imposition of new tariffs, USTR did not seek public comment
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`but rather simply announced that the increase would occur. Id.
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`48.
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`USTR in June 2019 invited the public to seek exclusions from List 3 duties on a
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`product-specific basis, apparently recognizing that List 3 would cause substantial harm to U.S.
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`companies and consumers, as well as the U.S. economy. Procedures for Requests to Exclude
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`Particular Products From the September 2018 Action Pursuant to Section 301: China’s Acts,
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`Poli